By Partner Milt Johns & Associate Rachel Leahey
On Dec. 18, 1028, President Trump signed into law the “Small Business Runway Extension Act of 2018.” The Act requires the federal government to determine the size of a business concern on the basis of its average gross receipts over five years instead of three years.
The Congressional Committee on Small Business described the purpose of the Act as “help[ing] advanced-small contractors successfully navigate the middle market as they reach the upper limits of their small size standard.”1 As the Committee explained, the Act: lengthens the time in which the Small Business Administration (SBA) measures size through revenue, from the average of the past 3 years to the average of the past 5 years. This modest modification of SBA’s size formula is designed to reduce the impact of rapid-growth years which result in spikes in revenue that may prematurely eject a small business out of their small size standard. This legislation will allow small businesses at every level more time to grow and develop their competitiveness and infrastructure, before entering the open marketplace. The bill will also protect federal investment in SBA’s small business programs by promoting greater chances of success in the middle market for newly-graduated firms, resulting in enhanced competition against large prime contractors.2
It is expected that this change will benefit most growing small businesses.
Contact Milt Johns, head of our Government Contracts Practice Group, at email@example.com with any questions and for assistance with small business size standard issues.